The impact of the financial advisory and intermediary services act of 2002 on consumer awareness and financial service providers in South Africa

The financial services industry is characterized by product suppliers having more information than consumers regarding product features and services. The purpose of this study is to explore this information asymmetry with particular reference to the Insurance Industry. Financial advisors, acting as intermediaries, are charged with the task of resolving this asymmetry through mandatory disclosures demanded by regulation. In South Africa, the Financial Services Board (FSB) monitors, regulates and supervises the financial services industry through the Financial Advisory and Intermediary Services (FAIS) Act of 2002 (RSA, 2002) and The Code of Conduct (RSA, 2003) for Financial Advisors. This study distinguishes financial products from other products and highlights the need for disclosures regarding product features, fees charged and contractual limitations of financial advisors. The dissertation starts with a review of literature on asymmetric information, regulatory interventions and consumer literacy. The subsequent sections deal with the methodology used, followed by results obtained and analysis. Using multistage sampling a national survey was conducted to establish whether consumers: are knowledgeable of the features of basic insurance products; are aware of disclosures they are entitled to; and are aware of the consumer education initiatives of the Financial Services Board. The empirical survey also captures consumers’ perceptions of their financial advisor’s knowledge of financial products on the market. The extent of and the reasons for premature termination of policies are also established. A survey was conducted amongst a sample of compliance officers to capture their perceptions regarding the disclosure of fees that are charged by financial advisors; clients’ knowledge regarding the features of Life Insurance products; premature termination of policies and some general practices amongst financial advisors. The surveys were supplemented by an interview held with managers at the Financial Services Board.

Grantor dc:publisher.institution

University of Zululand

Year dc:date.issued

2011

Author dc:creator

• Ramchander, Manduth

Advisors dc:contributor.advisor

• Contogiannis, E.
• Naidoo, D.A.

• Consumer behavior -- South Africa

Licence

• https://devspace.unizulu.ac.za/bitstreams/e723d944-9963-49d2-8a4e-6435fb6396aa/download